Insight | White Paper

In this white paper

Introduction 3

Common Challenges in Store Operations 3

Key Elements for Successful Daily Management of a Store 4

Conclusion 6

Sample Results 6

Authors 7

Key management elements to increase store performance

Retail | Daily Management of Store Operations

In a retail business,

the moment of truth

occurs in the store.

This is a known fact,

and yet, retail stores

often fail on the most

basic things that make

customers come to the

store for their

purchases.

2 Insight | Perspective

This whitepaper presents the key elements that ought to be in place in order to increase sales and profitability through improved store performance. Effective daily management enables stores to tackle the issues appropriately and to take immediate actions to handle them.

IntroductionIn a retail business, the moment of truth occurs in the store. This is a known fact, and

yet, retail stores often fail on the most basic things that make customers come to the

store for their purchases. In a chain operated retail company, the chain can provide the

store manager with tools, standards and guidance in order to run their stores in a way

that ensures customer satisfaction and increased sales. However, what makes a store

successful depends on how you make best use of, and implement these tools and

routines, together with the skills of the store manager.

This whitepaper presents the key elements that ought to be in place in order to increase

sales and profitability through improved store performance. Effective daily management

enables stores to tackle the issues appropriately and to take immediate actions to handle

them.

Common Challenges in Store OperationsMany companies are facing challenges on managing basic store operations in a “results-

orientated” way. Based on our extensive experience in analyzing and improving in-store

operations, we have identified the following as common challenges in store

management;

• Continuouslykeepthestorelookinggoodandattractiveaccordingtothe

chain’s standard format and guidelines

• Displayallproductsavailablewithcorrectpriceandproductinformation

• Optimizeinventorylevels

• Decreaseshrink

• Achieveefficiencyingoodsflow

• Optimizeworkforceplanningandexecution

As a consequence of neglecting these challenges, retail businesses may end up losing

customers and revenues. To illustrate these challenges complexity and

interdependencies, and the potential impact on store management, we will take an

in-depth look at two of them; Shrink and Out-of-stock – what are their underlying causes

and what are the consequences?

ShrinkShrink is a constant issue in all retail companies and caused mainly by theft, suppliers

actions and pricing and process failures (see image 1). Process failures include; mistakes

in handling the product when stocking and shelving goods, or failures in ordering,

forecasting and shelving processes. Some of the consequences of shrink are lost margin

and out-of-stocks. Key management focus can help immediately reduce shrink by

providingtoolsandprocessestomanagereplenishmentandgoodsflowprocessesin

store and thus reducing process failures.

Out-of-stockIncorrect stock levels confuse replenishment systems and help create out-of-stock. Other

reasons include stocking and warehousing problems, management errors and problems

in manufacturer availability (see image 2). Out-of-stock directly effect customer

satisfaction and sales. When a product is not available on a shelf, many customers go to

another store to purchase (see image 3). By effective management, most of the reasons

for out-of-stock can be minimized.

Insight | White Paper 3

Image 1. Sources of shrink

(Source: Checkpoint (2009); “Centre for Retail Research”)

Image 2. Sources of out-of-stock

(Source: Gruen, Corsten, Bharadway (2002); “Retail Out-of-Stock”)

As described, problems in stores are the result of a number of factors. The key to this lies

with the daily usage of tools and routines underpinned by active store management. To

ensure management by facts rather than opinion, certain traits are required. An

analytical mindset, combined with an action-focused management style can help

improve store performance. Analyzing KPI’s and taking actions based on performance,

using simple daily management tools systematically, communicating efficiently, clear

roles and responsibilities and using the right kind of control tools are all proven methods

to help improve performance when implemented and utilized in the right way.

Key Elements for Successful Daily Management of a StoreThe successful daily management of a store requires a set of tools and elements that are

used in a systematic way at all levels within a store. These tools should be simple

enough for all employees to understand and use but sophisticated enough to bring

structure and relevant information for decision-making. Based on our experience, the

following tools and routines create an ideal combination for store management

purposes: roles and responsibilities, daily management routines, KPIs and reporting

structure, effective meetings and store visits from the chain (see image 4). These

elements are presented in more detail in the following chapters.

Roles and responsibilitiesEveryone in a store needs to know what their roles and responsibilities are. In some

cases, these roles and responsibilities may not be clearly defined, documented nor

communicated within the organization. Undefined or unclear roles and responsibilities

mean that staff make their own decisions on what they should do. Equipping them with

clear roles and responsibilities, supported by adequate “rules” or guidelines, ensure that

all are pulling in the desired direction.

Clearly defined roles and responsibilities are very important for stores, and to make sure

that everyone knows exactly what is expected from them. This means that the daily,

weekly, quarterly and annual tasks and responsibilities as well as KPIs and reporting

responsibilities are clearly defined for everyone, and that there are no gaps or overlaps.

On a daily level, clear roles and responsibilities help individuals to focus on the right

things which have an impact on store performance. It is also a powerful motivational

tool for the employees. Therefore, clearly defined and communicated roles and

responsibilities can add significant value in the store.

Daily management routinesEffective daily management routines focus on getting the basics right and allowing

employees to make immediate improvements in store performance. Daily management

routines of a store and its processes should be executed in a systematic and disciplined

manner at every organizational level. Daily level management routines are crucial

because in retail everything happens quickly and stores need to be able to manage

challenges immediately. Stores often have difficulties in reacting quickly to changing

challenges if they lack a systematic way to ensure that all the daily issues are taken care

of by their employees. The problem can originate from poor management skills and the

lack of usage of tools to manage the daily store operations.

Daily routines make life easier for both staff and store management. They provide a

guide for daily work and management efforts. As a result, time is saved and employees

at all levels can reduce stress and confusion. Daily routines, such as ordering, shelving,

cleaning and merchandizing, all help ensure that the store’s appearance meets the

standards, shelves are full of products and shopping is made easy and attractive for

customers. Different tools, such as checklists and task lists, can be of great help for store

and department managers to make sure daily routines are completed successfully. Focus

Image 4. Framework for the store

daily management

Retail | Daily Management of Store Operations

4 Insight | White Paper

Image 3. Consequences of out-of-stock

(Source: Gruen, Corsten, Bharadway (2002); Retail Out-of-Stock”)

Dailymanagement

routines

Effectivemeetings

Store visitsfrom chain

Roles andresponsibilities

HighPerforming

StoreKPIs &

reportingstructure

should be on immediate corrective actions that have an impact on store performance

and on following-up on these actions. It is also important to analyze how the executed

actionshaveinfluencedthedailyKPIs.

KPIs and reporting structureA store should be managed by analyzing its performance through well defined Key

Performance Indicators (KPIs). Every person in the organization should take responsibility

forthestore’sperformance,andespeciallyforthepartsthattheyareabletoinfluence

throughtheirdailywork.Forexample,salesmenhaveadirectinfluenceondailyKPIs

such as their departments’ sales, sales per man hour and average purchase.

Unfortunately, it is common for stores to not follow daily level KPIs, or at least not on

every organization level. It could be that the employees do not know what the KPIs

mean, how they are linked to their everyday work, or how they themselves can have an

effect on store performance.

Stores should have well defined KPIs that are linked to the store’s goals and broken down

on a daily level. This enables everyone to easily see how well the store is performing

against its goals. Understanding KPIs requires training at every organization level in

store. By understanding and following the KPI trends and deviation of actual and target

levels, everyone is able to take immediate corrective actions to improve the store’s

performance. Without an efficient reporting structure with correct KPIs, a store may go

in the wrong direction without even knowing it, eventually causing significant problems

in the stores’ profitability. In retail, the time cycle is very short and therefore reporting

and controlling on a daily level is essential for efficient store management as it allows

them to quickly pick-up and manage issues before they may have a major impact on

profitability.

Effective meetingsStore Managers need to manage their stores in an effective manner to optimize

performance. Internal meetings should focus on the drivers of performance and

customer experience to ensure performance is optimized. A clear focus on improvement

actions, and usage of basic Action Logs will ensure systematic follow up of potential

performance issues. Above all else this will support and drive the correct behaviors that

will ensure continuous improvement.

Effectivemeetingsandmeetingstructureenableefficientcommunicationflowwithina

store and within the whole organization. Standardized meetings ensure that the right

topics are covered in the right forums and that the right people are part of the decision

makingprocess.Meetingsshouldfocusonactionsthathaveaninfluenceonstore

performance and these actions should be followed-up systematically. Critical operational

informationshouldbesharedatthestorefloorlevelonadailybasis.Dailyinformation,

KPIs and needed actions within the departments should be shared in an efficient way so

thatitreachesallfloorlevelemployeesinthestore.

Store visits from chainIn a chain operated retail business, stores need to be followed-up systematically by the

chain to make sure they are operating uniformly and that they have similar management

and store standards. Efficient co-operation with category management and stores is also

important to ensure that both category management and stores share common goals.

Both of these interfaces with the chain are rarely systematic, visits are not frequent, and

the visits are not standardized with a set agenda. Stores generally rely too much on the

store managers’ ability to manage the store in the direction that the chain requires. A

consistent approach from Regional/District Managers can help to drive consistent

application of agreed store standards.

Insight | White Paper 5

In a retail chain, it is essential that all the stores provide customers a similar shopping

experience; the store appearance meets the same standards, merchandizing follows the

same principles, assortment is mainly the same, pricing is aligned, etc. To make sure

that all stores meet the same standards within the chain, frequent outside store visits

are important. Regional or format managers’ store visits are more “controlling” ones

that concentrate on a store’s business results and making sure the store meets the

standards of the format. The other type of visit is for efficient communication and

knowledge sharing between category management and stores. These visits are

important to secure optimized assortment, pricing and campaigns with aligned

objectives.

ConclusionStores need a structured and systematic way to manage the daily business, which is

linked to the store’s overall management system. Stores are facing challenges every day

that need to be solved with immediate corrective actions in order to offer its customers a

good shopping experience. Stores that are able to shift the management focus from a

weekly and monthly level to a daily level have much better possibilities to improve their

performance and further improve their position in markets. Daily follow up of KPIs, an

action-focused approach that is based on store performance, efficient daily routines and

tools,efficientcommunicationflow,clearrolesandresponsibilities,andsystematic

follow-up from the chain build a structured way of managing the daily business.

It is important to keep in mind that the above mentioned key elements of stores’ daily

management, work closely together and should not be considered separately. Without

following KPIs on a daily level, you cannot be sure if the actions you have taken have a

positiveeffectonstoreperformance.Further,withoutanefficientcommunicationflow,

issues might not get solved before they cause problems in a store’s profitability.

Therefore all the elements are equally important and together they build a system,

where all the elements are tightly linked with each other.

Sample ResultsBearingPoint has helped a number of leading retail companies with large operational

excellence (OpEx) programs to improve store performance with the key elements

presented in this whitepaper. Results indicate measurable improvements when the right

combination of elements is tailored to each company’s specific needs and culture and

implemented through BearingPoint’s unique hands-on approach.

Metrics indicate clear improvements in sales, sales per manhour, number of customers,

shrink, gross margin as well as in stock levels and stock days. This can be seen as a result

of the right combination of key management elements implemented in a correct and

sustainable way. In the following, a few quantitative examples of results are presented.

On average, stores with new management elements have shown a 16 % increase in sales

(see image 5) and a 15% in number of customers and sales per manhour (see image 6).

General sales growth can be seen as a result of a combination of all key elements.

Growth in sales per manhour is mainly a result of a combination of sales, workforce

planning, general awareness of employees, motivational management and increased

add-on sales.

InoneoftheOpExprograms,BearingPointhelpedaretailclienttoimprovegoodsflow

in stores. By the end of the four month engagement, improvements had been

implemented to some 50 locations and significant results achieved in terms of reduced

stock and increased stock turnover, together with increased employee efficiency and

reduced write-offs (see chart 7 and 8). A key success factor for the engagement was the

implementationofastoremanagementsystemtocontrolthestoregoodsflow.Thenew

6 Insight | White Paper

Image 5. Sales growth during a nine

months OpEx programme

+16%

Image 6. Improvement in sales per man

hour during a nine months OpEx

programme.

+15%

Image 7. Decrease in stock levels during

a four months OpEx programme.

-15%

Image 8. Decrease in write offs during a

four months OpEx programme

-20%

managementsystemenabledthestores,notonlytoexecutenewgoodsflowroutines,

but also to manage all store related activities with better quality, and to control the

improved performance through aligned KPIs.

Authors:

Jari Laine, Senior ManagerJari is a leader of retail practice in Helsinki office. He has considerable experience from

operational excellence programs in retail industry.

Taru Hanén, Senior ConsultantTaru is a member of retail practice in Helsinki office. She has experience from various

retail assignments ranging from the store operations to support function rationalization.

Enni Pohjanlehto, ConsultantEnni is also part of retail practice in Helsinki office. She has strong background from

store management improvements and posses also knowledge from fast moving

consumer goods industry.

Insight | White Paper 7

Insight | White Paper

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